Bushfire insurance claims

in flames, and the insurance A burning issue: Australia is industry girds its loins

While the physical clear-up will take years, insurers and assessors have sprung into action to work with those who have lost literally everything. HAL WILLIAMS reports.

“HOW DO we sleep when our beds are burning?” Those lyrics from Australian band Midnight Oil (whose frontman, Peter Garrett, later became the country’s Environment Minister) are particularly haunting in the reflected light of the bushfire disaster Downunder.

Beds, the homes around them, as well as forests, farmlands, vehicles, barns and businesses have been burning in Australia since September 5, 2019. And — at the time of writing — the blazes rage on, fuelled by high temperatures and gusts of hot summer wind. Four states — New South Wales, Queensland, South Australia and Victoria — are still battling fires, many still out of control. To date, 29 human lives have been lost, along with an unknown number of wild and domestic animals, and some 2,500 homes and buildings destroyed. Flora and fauna have been decimated, the country’s delicate ecosystems ravaged.

Aside from the individual, shared and national sense of loss, there are financial losses to account for. And that’s where the insurance industry takes centre stage. Lisa Kable, of the Insurance Council of Australia (ICA), said 8,985 claims had been made (by early January) with more flooding in each day. Kable estimates the loss value at around $700m — a

Scenes of Australia’s Rural Fire Service battling blazes have captivated the world

figure that is almost certain to rise. More than 1,838 residential property losses have been confirmed (at the time of writing): 1,405 in NSW, 45 in Queensland, 88 in South Australia and 300 in Victoria. Total insurance claims for Australia’s bushfire season have so far reached $1bn, with assessments still flooding in.

That tally of losses increases daily, even hourly, as property owners gain access to areas that had been inaccessible. An awful reality awaits some, returning after the passage of the flames to find generational homes razed and landscapes forever changed. “Representatives from the ICA and the insurance industry are in many bushfire-affected communities,” Kable says. “Insurance assessors are active in many affected communities. The Australian insurance industry is well placed to manage natural disasters, she says. “Claims teams and assessors have already moved into some of the affected areas and are assisting customers faceto-face. The ICA has a 24-hour catastrophe hotline that people can use if they need insurancerelated advice.” The new hotline has, received thousands of calls in recent weeks. The ICA also hosts community forums in affected communities for local policyholders needing assistance with the insurance process. “These forums occur regularly for several months after a natural disaster of this scale,” says Kable. There’s no grace period or holding pattern in the insurance industry. Work starts on claims as soon as they are lodged and — depending on the claim and policy type — some are closed within a week of being lodged. “Twenty percent of claims lodged since September 5 have been assessed, and 50 percent closed,” Kable reports.

But while the insurance industry is calmly coping with an unprecedented level of chaos, the Australian government seems less composed. Energy Minister Josh Frydenberg recently demanded insurers provide the country’s treasury with details of claims for bushfire losses.

The demand was circulated to insurers by the ICA, which outlined 38 pieces of information about individual claims that Frydenberg is requesting. The detail includes street address, the year the building was constructed, and the amount for which it was insured.

The onus is on insurers to continue to provide this information for months, possibly years. Frydenberg also wants data on claims settlements, the dates of approvals by local authorities for reconstruction work, and when cash payments are made.

Insurers normally provide only aggregated data about total claims to the ICA, which uses the information for the catastrophes database.

The clean-up after the fires will take years, and the scale of the bureaucratic aftermath is likely to drag on as well. It is impossible to know exactly how big the task is, Kable says.

“The insurance industry only works with lodged claims, rather than predicting how many claims will be made and the loss value. Insurers know how many policies they have in affected areas, but it will depend on how much of the affected area sustains loss or damage.” Home, contents, motor vehicle, business interruption,

commercial and farm insurance policies… all these need to be assessed, collated, completed.

All Australian insurers will be able to pay valid claims without going under, Kable believes, thanks to reinsurance — insurance for insurers. It can be used to cover different risks and insurers use this failsafe to ensure they can claims in the event of a major disaster, such as the bushfires, but which could also come in other destructive forms: cyclones, floods, earthquakes, tsunamis. This is usually called catastrophe cover.

“Insurers may also use reinsurance to cover situations where they experience claims from policyholders that are higher than a certain value, which has been agreed beforehand with the reinsurer.”

Reinsurance involves a number of insurers, often from various geographic regions, that join together to share risk exposure. Thanks to the robust system, it is unlikely that even a disaster on the scale of the bushfires will

Some homes have been razed, others saved in time

sound a death knell for smaller insurance companies. “Insurers make appropriate prudential and logistical provisions for natural disaster season,” Kable says. The question of how long Australians must wait before they can be compensated for lost homes, cars, livestock — and even loved ones — is an open

ended, but optimistic, one. “This depends on when they lodge their claim,” says Kable, “the type of claim, and the way they choose to be compensated.

“Cash settlements are much faster than replacements, rebuilds or repairs.

“The government assists with different aspects of recovery after natural disasters. In the past they have assisted with debris removal and clean-up costs.”

And few people should find themselves falling into any gaps in their policy. All Australian home and contents policies cover fire — which includes bushfire. Act of god clauses don’t exist in Australia.

Kable says she is unable, at this stage, to speculate on the eventual monetary total of replacing, repairing and repatriating once all the dust and ash has settled, or what the effect will be on the country’s economy. “That’s one for an economist,” she says.

Treasurer Frydenberg and Commonwealth officials recently made a statement on the industry’s

Insurers have received 13, 750 bushfire catastropherelated claims since November 8, with losses estimated at $1.34 billion.

The ICA is anticipating a sharp increase in the number of claims as household property assessments are undertaken and commercial claims are lodged.

response to the catastrophe. The industry was represented by the ICA and chief executives and senior staff from major insurers including IAG, Suncorp, QBE, Allianz, Zurich, Commonwealth Bank and Westpac.

The council reassured Frydenberg that the industry is harnessing all resources to help customers in the four states affected. Insurers said that they were dealing “compassionately and sensitively” with customers and are ensuring the claims process runs as painlessly as possible.

At the time of the meeting, insurers had received 13,750 claims from New South Wales, Victoria, Queensland and South Australia. Many more claims are expected to be lodged in coming days and weeks. Insurance losses stand at $700m.

The Insurance Council’s disaster hotline has handled more than 1,000 calls per fortnight, providing guidance to householders and business owners.

The ICA has also opened an online register to help local tradespeople and builders play a significant role in rebuilding their regional communities. ICA head of Risk and Operations Karl Sullivan said insurers were committed to using local trades and builders where possible.

“Employing and contracting local professionals and suppliers during the rebuilding phase of bushfire recovery is an essential component in ensuring the

economic viability of communities, including the preservation of jobs and supporting local businesses and service providers,” he said. “Building professionals will still need to provide competitive quotes when contracting for work. “Experience from recent natural disasters shows insurers predominantly use local trades for most rebuilding and repair works.”

Sullivan urged residents to watch out for unscrupulous repairers, or firms offering to assist with insurance claims. The Consumer Action Law Centre has also called for a crackdown on exploitative claims management services.

The ICA is hosting insurance hubs to assist customers in southern New South Wales. Disaster recovery specialists from the Insurance Council and insurance companies will assist policyholders with insurance questions and help with the insurance claim process.

Sydney Opera house seen without the now-familiar smoke shroud